EDITORIAL: From firefighting to fiscal stabilisation

The medium-term budget policy statement should not be applauded for timidly catching its breath. If the medium-term budget is to matter it must do more than document a cyclical uptick in revenues and hope that markets confuse short-term luck with long-term competence. Finance minister Enoch Godongwana’s moment is to make a clear, defensible case for why this reprieve should be converted into lasting stability or admit, plainly and unembellished, that it cannot.

Let’s be frank. The headline improvement many expect — slightly better revenue, a narrow budget shortfall, a tad higher primary surplus — is the kind of weather-dependent good news that vanishes once global growth hiccups or commodity prices wobble. Elevated gold and platinum prices are welcome. Better tax collection is welcome too. Still, those are cyclical gusts, not structural winds. Treating them as permanent would be a policy malpractice.

Godongwana’s first job in the medium-term budget is to separate one-offs from fundamentals. Show the maths. Spell out which revenue gains are driven by temporary commodity booms or favourable exchange swings and which come from real, enforceable improvements in tax administration.

Short-lived reprieves are easy to win, but permanent credibility demands a willingness to trade political applause for institutional applause.

If the primary surplus edge is largely cyclical, say so, and explain the adjustment path the Treasury will take when prices normalise.

That leads to the second point. Use this window to shore up the balance sheet, rather than indulging in political expediency. The temptation to redirect a slice of the windfall to soothe wage demands, send money to politically sensitive constituencies, or paper over underperforming SOEs is obvious. Resist that. If the medium-term budget locks even modest gains into debt reduction or into truly catalytic capital investment, it creates optionality. If it fritters the gains in recurrent spending it eats the goose that laid the egg.

A practical framework would help. First, a conservative baseline revenue projection and an explicit reserve for cyclical gains set aside for debt stabilisation and investment. Suppose the Treasury can demonstrate that temporary revenue gains are used to lower future borrowing needs and to create bankable, reform-dependent investment pipelines. In that case it converts private sector caution into a partner for recovery. The alternative is that the private sector will continue to hoard R2-trillion in cash reserves.

Second, a clear triage of new spending requests that ties allocations to measurable reforms and performance thresholds. Targeted and Responsible Savings, or Tars, is the linchpin that makes this possible. Gone is the old incremental budgeting in which departments received a flat inflation bump. Think of it as a fiscal metal detector, scanning every line item for low-impact programmes that are ripe for the chop.

Under the new rules, Treasury analysts and department officials will jointly rank spending, present their findings to the cabinet and either kill, scale back or retool flagged initiatives. No blind incremental increases. Ministries must now defend every rand with performance data and development alignment.

Inflation targeting is the third piece of this jigsaw. Markets and corporates crave clarity on monetary-fiscal alignment. The expectations are that Godongwana will signal an eventual move toward a lower inflation target. He should also map the intention, timeline and implications.

The medium-term budget has the potential to be a subtle but significant pivot from firefighting to strategic repair. That shift won’t immediately transform growth or labour markets, but it will buy space for the policies that can. Short-lived reprieves are easy to win, but permanent credibility demands a willingness to trade political applause for institutional applause. We deserve the latter.